The EU Stands Up For Spanish Companies In Cuba Against Trump's Sanctions

Last week the Administration of Donald Trump announced the application of the Helms-Burton Law. Reactions were immediate. The Spanish Government, aware of the volume of Spanish business on the island, asked the EU to support the European companies settled in Cuba and Brussels did not think it twice. The EU not only has threatened the US with bringing the country before the World Trade Organization (WTO) if it reactivates the sanctions but has also confirmed that it will “consider all the instruments at its disposal to protect its interests”. In this context, to further complicate things, both powers have reopened conversations on the US-EU trade agreement during the same week to avoid a transatlantic trade war.

Created in 1996, the Helms-Burton Law meant to allow individuals to claim before the US justice compensations against companies of third countries that have invested in Cuban goods that were expropriated after the 1959 revolution. For more than 20 years, the law has been repeatedly suspended due to an agreement between the EU and the US to exempt European investors in Cuba from possible US sanctions against the island. Donald Trump has been the first US president to break with this dynamic, increasing the tension between Brussels and Washington.

Among the EU countries, Spain is probably the most concerned Member State when it comes to protecting companies’ investments in Cuba, especially regarding the tourist sector and the big hotel chains such as Meliá Hotels International, Barceló and NH. Spain is the third largest trade partner of Cuba behind China and Venezuela and the main European trade partner, with a market share of around 40%, so it is not surprising that the Spanish Government strongly opposed to the Helms-Burton Law since day one. “The extraterritorial application of the legislation is contrary to International Law”, stated the Spanish Executive, that also considered that the sanctions “deteriorates bilateral relations between allied countries."

Although last Monday Spain supported the opening of negotiations regarding the transatlantic trade agreement, the Government of Pedro Sánchez has pointed out that Trump’s sanctions against European companies in Cuba are incompatible with the spirit of trade negotiations. This is why Madrid has asked Brussels to take into account the possible activation of the sanctions before taking the negotiations any further, which means that the talks could be frustrated even before they began.

“The Government of Spain will be supporting Spanish companies in Cuba and we understand that Europe will support, together with Spain, companies with legitimate and well-organized business activities in other countries," stated the Spanish Executive spokeswoman, Isabel Celaá, last Wednesday. The same day, the EU's Foreign Affairs chief Federica Mogherini and the European Trade Commissioner Cecilia Malmström reiterated Europe’s “strong opposition to the extraterritorial application of unilateral Cuba-related measures,” in a joint statement. In addition, Mogherini and Malmström sent a letter to Mike Pompeo, US Secretary of State, warning of the EU’s position and determination to respond.

According to both, the decision is “contrary to international law” and is “a breach of the United States' commitments undertaken in the EU-US agreements of 1997 and 1998, which have been respected by both sides without interruption since then.” As a result, “the EU will consider all options at its disposal to protect its legitimate interests, including in relation to its WTO rights and through the use of the EU Blocking Statute.” This mechanism would permit European companies to recover any economic damage caused by the US sanctions by allowing them to sue US firms with assets in the EU before European courts. In other words, if a US company claims a compensation before a US court against a European company, the second one could sue the first one before an EU court in order to claim the same compensation.

After achieving to restart trade negotiations, penalizing investments of European companies do not seem like a smart move. If Trump finally confirms the application of the Law, a new chapter of commercial tension would begin and more Member States could join the position of France, contrary to the trade agreement with the US. Spain may be the first one to change its mind, as the reactivation of the sanction poses a serious threat to the Iberian country’s investments in the island. It is a very delicate moment, not only the bilateral relations between allied countries are at stake but also the welfare of the Cuban population, which depends to a large extent on foreign investment.